'^w^-^mi^mrs S67m A = AS C/J = = — JO ^ == ZJ3 !^H - — := ■ ■> b m 9 ^ 31 — ro 7 = — ^ 81 5 1 ^'^ ^ — - 1 9 _:t: ■ ^'-*^L^ ^n r-M^. Snowden A measure proposed to secure to the People a safe Treasure and a sound Currency THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES /I. ty. c^ 1f~C,^X'44^ c.^^yC^)^t^^ MEASURE PROPOSED TO SECURE TO THE PEOPLE A Safe Treasury AND A SOUND CURRENCY. By James Ross Snowden, Director of the Mint of the U. S. I 4 A MEASURE PROPOSED TO SECURE TO THE PEOPLE A Safe Treasury AND A SOUND CURRENCY. By James Ross Snowden, Director of the Mint of tlie U. S. PHILADELPHIA: BENJAMIN F. MIFFLIN, WALNUT STREET. 1857. 613 S^7, INTRODUCTIOX The following communication, addressed to the Secretary of the Treasury, is published with his sanction. The proposition therein considered embraces two objects, namely : 1. To authorize certificates to be issued on deposits of (jold hullion, at the Mint and its branches, and the Assay Office, in con- venient sums at the option of the depositor, and payable to bearer. 2. To permit similar certificates to be issued at the minting es- tablishments above named, and at the Treasury and Assistant Treasuries of the United States on deposits of the gold coins of the United States. The Mint is authorized, by the 19th section of the general Mint law, passed January 18th, 1837, to give the depositor "a certificate of the net amount of his deposit, to be paid in coins of the same species of bullion as that deposited." But it is proposed to go further, and permit several certificates to be issued for the same deposit, by dividing the amount into such sums as the depositor may wish, and making them payable to bearer. It might be proper that neither the hullion nor the coin certificates should be issued for a less sum than twenty dollars ; but this point, as well as the details of the plan may, with propriety, be left for future conside- ration. If the principle suggested is sanctioned, the details can be very readily supplied. As reference is made in this paper to a remark in my last annual report, respecting the production of the precious metals within the last few years, it is deemed proper to insert it here. After showing 2(M)3539 that the whole coinage of the Mints, up to the 30th of June, 1857, amounted to upwards of five hundred and eighty-eight mil- lions of dollars, I observe that " of this amount there has been re- ceived since the 1st of January, 1849, of native gold, the produc- ' tion of the United States, the sum of four hundred and two millions of dollars. If, in addition to this sura, we add the gold produced in Australia, and other foreign countries during the same period^ — which may be stated to be about five hundred mil- lions of dollars, and the production of silver bullion from all sources, which is at the rate of about forty millions per annum — it will be seen that within this comparatively brief period, the Avorld's supply of the precious metals has been increased to the extent of twelve hundred and forty millions of dollars. In view of this great increase, and of the further supplies which will doubt- less for years to come be received from the same sources, it may well be considered, whether in a country so highly favored with the production of gold, and the supply of silver as ours, some mea- sures should not be adopted by which the people, in like manner with the Government, should enjoy the advantages of a specie currency." I beg also to add, as a further remark, that since the present communication to the Secretary of the Treasury was prepared, the contingency therein referred to, of the probable withdrawal of the bullion fund from the Mints, has happened. As the Mints are now without a bullion fund in gold, and great delay in paying deposi- tors of gold for coinage must necessarily take place, the reasons in favor of the issue of Mint and Coin certificates are much strength- ened. On this point I refer particularly to the sixth paragraph of the communication. In concluding these preliminary remarks, I think it not inap- propriate to refer to the second annual message of Gen. Jackson, in which it will be seen that he thought it practicable and consti- tutional " to organize a branch of the Treasury Department, based upon public aucl individual deposits." The Indei)endent Treasury system lias most happily provided for the security of the I public deposits ; and established a constitutional currency for the government. AVe will have advanced further in the right direc- tion when we provide an equally safe Treasury for individuals; and secure to the people a paper currency which will actually re- present, and be at all times convertible into, gold. If, in addition to this measure, the States adopt the Indepen- dent Treasury system, then the country will substantially possess the advantages of a specie currency, and be relieved from the per- nicious influence of banks of issue. The banks will then become what they ought to be, namely, places where deposits of money f may be made, drafts purchased, and discounts obtained. Gold and silver, and" the undoubted equivalent of the former, namely, mint and coin certificates, will then be the general currency of the country. To assist in the accomplishment of these desirable results, this brief pamphlet is respectfully submitted to the public. J. R. S. Mint of the United States Fhiladelphia, Dec. 24ith, CES, "> 1857.]" MINT OF THE UNITED STATES. > rhiladttphia, Xoveiiiber i, 1S57. ) TO THE HON. HOWELL COBB, Secretary of the Treasury. Sir: When I submitted to your consideration a propo- sition, relative to the issue of certificates on the de- posit of gold bullion and coin, and placed in your hands a brief statement of some of the advantages which would result from their issue, you were pleased to indicate a wish, that I should present my views more fully on the subject. In doing so, I will notice some of the advantages of the plan proposed; and will adopt the same order pursued in the paper I placed in your possession. 1 . Security to the owners of specie. This would be the same as that of the government for its own funds, and no improvement in this respect would probably be desired. The advantages of this security would be felt to be so great, that I am satisfied that large amounts of the precious metal would ultimately be accumulated in this way. At present, the holders of coin, beyond what is immediately needed for current use, have to choose between private hoarding 8 with its hazards and annoyances, and the public injury consequent upon its withdrawal from circu- lation, or its deposit in a bank, to be exposed to the various risks, which sad experience shows to be inci- dent to such an institution. 2. The practice of hoarding is much induced hy a leant of confidence in hanks and individucds. If the holder of coin is made secure, he would, in most cases, gladly bring it forth from its hiding place, and thus relieve himself from the anxiety and danger which arise from its possession. Robberies, bur- glaries, and murders are frequently induced by the practice of hoarding. It is believed that the plan proposed would check this injurious habit. 3. The specie thus deposited would not he with- draitm from circulation. On the contrary, it would be as available as if it remained in actual circulation. The specie certificates, representing as they would dollar for dollar, would be as advantageous, for the pur- pose of currency, as the coin itself. For making pay- ments to the government, and for domestic exchanges, and in other large monied transactions, they would be more convenient than coin, by reason of their porta- bility, the readiness by which they could be counted, and their facility of transmission. 4. The specie thus deposited looidd constitute a great reserve, to he ivithdraiun, at any time ivhen a special de- mand for coin might arise, without the slightest disturhance of the commerce, finances, or loan market of the country. This is undoubtedlv a most beneficial feature: and that it may be better uiiderstoocl, a brief reference to the usual causes of wliat is called a financial crisis, is appropriate. Such a crisis we find, in this country, almost always to happen in consequence of an unusual demand, or tlie apprehension of sucli demand, for coin. This demand is chiefly induced by an excess or redundancy of paper currency and credits, evidenced in the first instance by a demand for coin for expor- tation. Under a proper system of currency, namely, one of specie, the exportation of coin cannot be regarded as injurious. Gold, under such circum- stances, would go wherever it is required, just as cot- ton, wheat, or any other production of the soil does. — But whilst we rejoice at the exportation of these agri- cultural productions, we evince great reluctance in parting with gold. This is a consequence of the false artificial system which has been imposed on the com- munity ; and to this we must look for an explanation. We shall find it in the organization of our banks. These institutions are mainly the repositories of the specie of the country, except what is in current circulation and in the vaults of the government. On the basis of this specie they obligate themselves to pay, on demand, to their depositors and note holders, in coin, an amount from six to ten times, or more, the total value of the specie actually in hand. This disparity of immediate means to immediate liabihties is so great, that in case their creditors, or any considerable proportion of them demand the specie, the banks must fail to pay. But even what is comparatively an insignificant call for coin, and does not cause the faiku'e of the banks, may, nevertheless produce great disasters to the busi- ness operations of the country. The banks, conscious 10 of their inability to withstand a demand upon them, endeavor to check its first symptoms, and to protect themselves, by calling in their loans, or collecting them as they fall due, and refusing the discounts to which the merchants and manufacturers have been accustomed. Such a contraction of loans, to a com- munity which has based its business on the expecta- tion of them, must necessarily prove eminently disas- trous. How often have we seen a slightly increased demand for specie on the banks, growing out of, per- haps, the accident of a foreign war, or an unusual im- port of foreign goods, bring in its train that contrac- tion of the loan market which eventuates in a paraly- sis of credit and business, and the prostration of the merchant, manufacturer, mechanic and laboring man 1 But without enlarging on this topic, I think it will readily be seen that it would prove a great benefit if the demand for specie did not operate, as it now does, upon the banks, or in other words, upon the loan market. By the adoption of the plan under considera- tion, I am of opinion that any unusual drain of coin for foreign exportation or otherwise, would operate mainly, if not solely, on these mint and coin certifi- cates. If so, it is evident that the banks could con- tinue their usual functions without being disturbed by such a demand. The loan market w^ould not be aff'ect- ed in any degree, and the panics and financial disas- ters, now so constantly attendant upon the movement of specie, would cease. These views, of course, are predicated upon the idea that the certificates herein noticed are not to be counted by the banks as specie.* It is not designed to aftect the legislation of the several States on this subject, which permits only the 11 coin of the United States to be so counted. Hence the certificates could not be vised as a means of bank- ing operations, but as a circulating currency them- selves. The gold which they would represent would be the great reserve, to be used when the special de- mand for it should arise. 5. ThepJan^ hij substituting iiajjer for specie placed on deposit, ivill avoid the loss incident to the ivear, clipping and other injuries to coin, through circidation. This in time constitutes quite a considerable item of loss, and ultimately eventuates in a degradation of the stan- dard by diminishing the weight, or involves the ex- pense of re-coinage. A re-coinage ordered by the English government was commenced in 1774, and ended in 1788. During that period the coinage was £18,000,000. Probably three-fourths of this amount were pieces re-coined. The deficit of weight was an expense to the government of £500,000 — about 3 J per cent. Many of these pieces, it is true, had been in circulation for a very long period. But a loss by wear is unavoidable, inasmuch as the metals used must be sufiiciently malleable to be rolled, cut into planchets, and milled, and receive the impression from the dies at a sins'le blow. "&' 6. The plan icould obviate the necessity of a govern- ment bullion fund being retained at the Mints, In ex- planation of this remark, I mention that depositors of bullion are now paid immediately after the values of their deposits are determined by an assay, say in two or three days, although it takes as many weeks to manufacture their bullion into coin when it is brought 12 to the Mint in its natural or unrefined condition. The g-overnment advances to the Mints and the Assaj- Office the funds necessary to aflect such prompt pay- ments ; and it is found that for all the establishments about five millions of dollars are required. But under the proposed plan so large an amount of the deposits would remain permanently on hand uncalled for, that these government advances could be withdrawn with- out any inconvenience, which in the present state of the treasury would be highly advantageous, and seems, indeed, in any contingency, to be desirable. 7. It may he allecjed that the proposed certificates icould substitute a government pa2^er currency for a specie currency. To this I remark, that such an objection is founded on an abuse of terms. A paper currency, in the sense generally understood, and to which all the objections to such a circulation apply, is one emitted upon the mere general credit of the issuers, whether individuals, banks or governments. As to banks, their principal object is profit to their stock- holders. The more of their credit they can lend, the greater profits accrue. Hence they are stimulated to outrun each other in the career of expansion, foster- ing a spirit of speculation and high prices, which in- duces increased applications for discounts until the currency becomes redundant ; when some apparently trivial cause exposes the instability of the system, and brings on a reaction, producing ruin and destruction to all the industrial pursuits of the community. It is unnecessary, however, to discuss the evils of the banking system. The present unhappy condition of the country speaks, on this point, more forcibly than 13 words. But none of the evils thus adverted to can be produced by the certificates T am now considering, because they will not be based upon the credit of the issuers, but upon deposits of bullion and coin. They will, in fact, be merely receipts for bullion and coin. There cannot be an over-issue of them any more than the specie, for which they are receipts, could be an over-issue while in circulation. Nor could their emis- sion have any further tendency to inflate prices or encourage speculation than such specie itself. 8. It is proposed tJiat the certificates he made pai/a- hle to hearer^ and not to order. For manifest reasons the former will be the most expedient, both as facili- tating the currency of the certificates, and relieving the government and its officers from responsibility or uneasiness, in relation to the genuineness or validity of endorsements. 9. It may he admitted that tlie plan loill involve some risk, and p>erhaps expense to the government. With proper guards and checks, such as are used in carry- ing into effect the Independent Treasury system, and such further securities as may be deemed expedient, the risk may be regarded as inconsiderable, and the expense but trifling. The official organization for the execution of it is, at present, complete; some addi- tional clerical services may, on experience, be found necessary, which could be provided for as the exigen- cies of the case may, from time to time, arise. But if the risk and expense are made a subject of ob- jection — allowing them more force than they seem to possess — it may be asked by way of reply, whether it 14 does not become necessary for the government to as- sume a responsibility and expense to accomplish a great constitutional object and an evident public benefit, as is done in other cases where its action is deemed expedient. As a general remark, I may state, that the adoption of the plan proposed will give to the people the ben- efits of a system similar, in many respects, to the ad- mirable one now used by the government. It looks towards the adoption, by the people, as well as the government, of specie or its undoubted representative, as the general medium of currency and exchange. It will, also, in my judgment, lead to the establish- ment of similar coin treasuries in the several States. In my recent report to the Department on the operations of the Mint, I have exhibited the amazing increase in the world's supply of the precious metals within the last few years. I will not enter upon this subject here ; but I refer to it in this connexion for the purpose of showing that if we create a demand for coin, we can have it to any amount that the busi- ness of the country requires. ' The project I have been considering is not abso- lutely unsupported by precedents. Banks, according to their primitive organization, and before they be- came vitiated with the privilege of issuing paper money, were mere depositories for bullion and coin, securing to the depositor a credit exactly equal to such deposits. The banks of Venice and Amsterdam were such; and the Bank of Hamburg still remains on that footing. To show the exceeding commercial convenience of the plan, it appears that the credits in the banks of Venice and Amsterdam, always bore a 15 premium as compared with coin up to the time of their subversion under the French Revolution. The Bank of England also, under its late re-charter, em- braces some features assimilated to the proposed plan. It has the privilege, it is true, to issue notes on its general credit up to the sum of £14.000.000 ; but all notes issued beyond that sum can only be in excliange for an equivalent amount of bullion brought to the bank. Its functions in regard to such additional is- sues are therefore absolutely mechanical, as much so as would be the case under the proposed plan of issu- ing specie certificates. It was the intention of the authors of the new bank charter — which was intro- duced by Sir Robert Peel, and prepared by him and other eminent political economists of Great Britain — that the volume of the currency should swell and di- minish just as specie would were there no bank. As specie accumulates, it goes to the bank to be ex- changed for an exactly equivalent amount of notes. As specie is demanded, it is withdrawn by the notes being returned again. Tliis result appears to have been thus far secured. There are, however, objec- tions to the English system, growing out of other features of the organization of the bank, especially the power to issue the large amount of £14.000.000 on " securities," which may probably disappoint the expectations of its authors. The plan I herein advo- cate has all the benefits and none of the disadvantages or evils of the institutions referred to. As to the power of Congress to authorize the is- suing of the proposed bullion and coin certificates, I have no doubt. It is not a bank that is suggested or anything like one. No power to loan, to discount, or 16 deal in exchanges, or transact any other business, is asked for; but simply the mechanical function of re- ceiving gold bullion and coin, and giving certificates therefor. Without looking to the other and more gen- eral provisions in the Constitution, this power would seem to be embraced in the constitutional recognition of " a treasury of the United States," and the power " to coin money ; regulate the value thereof, and of foreign coin." I remark, in conclusion, that this subject was re- cently brought to my special attention by James Worrell, Esq., of Harrisburg, who sent me a copy of a resolution adopted by the Senate of Pennsylvania, in which a part of the plan herein considered, namely, the use of Mint Certificates, as a circulating medium, was recommended, and who asked my views upon the subject. It will be observed that I have con- sidered this point in connexion with that of securing deposits of coin at the Mints and Treasury offices of the United States. I have deemed it proper, for obvious reasons, to communicate my views upon these subjects to the Treasury Department. I beg to express the hope, that the plan suggested may receive the sanction of the government, and of Congress, and thus secure to the people the benefits of a safe treasury, and a sound currency. I have the honor to be, with great respect, your faithful Servant, JAMES ROSS SNOWDEN, Director of the Mini. -^^lllBlU^- ^RP THE LIBKAKX fTNTVRRSlTY OF CALIFOi^NlA - rue 4 iMnyS-T ,|3^.<.v UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. ">l ^li\i{.±i^(^ Form L9-75m-7,'61(Cl437s4) 444 iHiiiiiiiimiiiiiiiiiiiiiiiiiii AA 000 593 785 / ""src-^ '0 c Un/Ve, '""'^^^^'ch Library -^ 'I !